Internal audits are critical to a company’s organizational processes and are typically a mandatory annual requirement. These audits serve to independently review the internal processes and controls within a company. They also ensure the company’s books and financial systems are managed seamlessly. Additionally, internal audits help identify potential control gaps within these areas and recommend the proper solutions for addressing them.
Understanding Internal Audit Outsourcing
Internal audit outsourcing entails using a third-party or outside company to serve as your third line of defense, which means engaging internal auditing services of independent professionals who are not necessarily the company’s employees. However, these professionals can still work as a company’s in-house team. For most large companies, having an in-house internal audit team can sometimes be the most cost-effective option. Most internal auditors are licensed professionals under an authoritative body. Still, it’s expensive to hire and retain a professional and experienced internal auditing team. Nevertheless, these professionals play a critical role within a company, ensuring that its internal controls and operations are as effective and efficiently managed as possible.
There are many different types of internal audit functions, namely:
- Full Outsourcing:This requires hiring an external provider to oversee the entire internal auditing function. This could be an independent public accounting firm, but must be one that is different from your company’s external auditor.
- Partial Outsourcing: This involves delegating a substantial part of your internal auditing services to a third party.
- Co-sourcing: All the internal auditing services are handled by both the in-house auditing team and an external third-party services provider. Like a full outsource, this provider should be an established accounting firm that is not the same as the company’s external auditor. You can opt for this type of outsourcing if your company experiences a staff shortage, needs to meet specific deadlines or handles complicated projects that require unique expertise. This approach can also come in handy when you need to cover the most remote business locations, when specialized skills are scarce, when you need to adopt a new technology or when you’re required to review specific compliance requirements with professional bodies/law, such as General Data Protection Regulation (GDPR) or Sarbanes-Oxley Act (SOX).
- Subcontracting:This applies when you subcontract specific short-term projects to a third-party.
- Loan-staff/Staff Augmentation: If certain times of year, or projects, require short-term horsepower to help bolster your internal team, contracting with an external party to provide resources can be a great option.
Why You Should Outsource Your Internal Audit Functions
You may have directed or managed various internal audits for many years. However, even with such vast experience, the process may overwhelm your in-house team. For example, you may need to adopt new strategies or reinforcement as efficiently as possible. Or you may want to update or streamline your existing processes with professional input and insights from a third-party auditing team. Whatever your reasons, sometimes outsourcing is the best strategy to employ to restructure your internal audit programs and stay current in your industry.
Advantages of Internal Audit Outsourcing
There are many advantages that internal audit outsourcing can bring to your organization including, for example, a stronger team with breadth and depth of skills in information security to assist in mitigating potential risks and ensuring sustainable compliance. Outsourcing your internal audits comes with multiple benefits including:
- Specialized Skills: Your organization may benefit tremendously from specialized skills from outsourced professional auditors. While large companies may have the capacity to onboard an in-house internal auditing team, the same may not be possible with smaller firms. Therefore, your organization stands to gain tremendously from the expertise and knowledge of a seasoned outsourced internal auditor.
- Time Efficiency: Comprehensive and value-added internal audit processes must pass through various stages of implementation. From developing the structure to onboarding new employees to planning the strategies, these steps take time to complete. With an outsourced internal audit function, the process and ongoing enhancement takes less time given the outsourced provider’s already developed and proven teams, tools and processes.
- Cost Effectiveness: As already mentioned, internal audit outsourcing can bring much needed efficiency and cost effectiveness. Furthermore, internal audit outsourcing often has a fixed price, making it easier to plan and budget accordingly.
Considerations When Selecting an Internal Audit Outsourcing Firm
A professional audit firm should do the following:
- Follow your company’s professional standards of work.
- Retain your company’s processes and requirements, thereby eliminating the need for repeat orientations or backtracking for future engagements.
- Understand your company’s structure and policies and work within them.
- Offer relevant industry insight to the audit committee and top leadership.
- Follow all compliance regulations and offer relevant updates on the same.
- Maintain good standing with relevant professional organizations.
- Help your organization streamline all auditing processes and improve efficiency and effectiveness.
- Impart auditing tips and advice to your in-house auditing staff (if applicable) through scheduled training.
How Cherry Bekaert Can Help
Whether your company is experiencing staffing shortages or needs to outsource or co-source your internal audit functions, Cherry Bekaert’s seasoned Risk Advisory practice offers the necessary experience and knowledge to conduct highly effective and efficient internal audit services. By leveraging a professional services firm, you gain critical insights into cybersecurity, IT consulting and risk management best practices to help boost your business processes, mitigate risks and maintain compliance requirements.
Additional Resources:
Article: Five Things to Look for When Selecting Internal Auditor
Podcast: Internal Audit Plan Common Mistakes
Article: Tips for Success: Effective Risk Assessment and Internal Audit Planning for Public Sector Organizations
